Year-End Finances, Budgeting, and Legal Accounting [Guest Post]
We thank the Lawyerist.com team for this guest post.
The end of the year is a critical time for your law firm’s finances. From closing the current year out to preparing for the next, the tasks at hand can seem overwhelming. Preparation ensures you’re ready for a successful year-end and next year’s business growth.
Preparing Your Finances for Year-End
It’s never too early to start preparing for your year-end accounting tasks. Here are a few key steps to take.
Consider Your Taxes
As a solo lawyer or small firm, your tax payments are expected quarterly. Before the end of the year is up, check to make sure your tax payments are current. If they aren’t, take care of it now to avoid an underpayment penalty.
Also, review other accounts—e.g., retirement, child care, or college savings—to make sure you’ve made the necessary contributions.
Prepare Your Records
If you are responsible for your own records, get all your paperwork such as receipts and invoices in order for year-end accounting. If you use an accounting software, look over your records and check for any missing expenses or payments. Preparing these records now will save you time and possibly cash come tax time.
Get Your Credit Reports
You must also prepare for ethics regulators who might look over your credit reports. Look for issues that could come back to bite you such as delinquent accounts or judgments. Put a plan in place to clear up any issues or errors as soon as possible so you can reach your business goals such as borrowing for growth.
Important Tips for Next Year’s Finances
During this time, it’s best to start preparing for next year’s finances by carefully assessing your budget and accounting practices.
Take a Glance at Your Accounting Statements
Review whether you were in the red or the black each month and by how much. Look at your cash flow statement to see if you need to better prepare for expenses next year. Assess your budget and how it compares to your revenue and expense report. If you see changes that must be made, now is the time to make them to poise your business for financial growth in the next year.
Assess Your Current Vendor Spending
Evaluate where you can cut back on costs in preparation for next year. Take a moment to assess your current vendor spending. This will include expenses such as:
- Cell phone or other telecommunications equipment
- Office space
- Accounting software
- Timekeeping software
- Contract labor
Check with your vendors for pricing changes or shop around to see if another vendor offers a better price. You can also check for discounts offered by your state bar or another association.
Look at Your Accounting Practices
New practices that can streamline your accounting process are best implemented at the start of a new year. Look at your billing process, timekeeping process, trust account reconciliation, and more to assess whether changes should be made. If so, prepare new practices to take over in the new year.
Prepare for More than Your Cash Flow
Preparations for the year to come should include more than just your accounting. Take steps to prepare your firm for improvement and growth. To discover where your firm could improve, take the Lawyerist Small Firm Scorecard™ today.